Carvana buys Adesa US auction business for $2.2B to boost used car sales

U.S.-based online car marketplace, Carvana, has agreed to acquire KarGlobal’s Adesa U.S. auction subsidiary for $2.2 billion in cash. The purchase seeks to add another revenue stream and a network of physical sites that could help strengthen operations.

The deal announcement, along with a fourth-quarter earnings report, marks a transition to a more traditional physical car dealer from the existing pure online business.

Carvana’s customers can use their web or mobile app to shop, buy, and finance their vehicle purchases. The purchased vehicle can be delivered directly to a customer’s home or chosenfrom one of its 30 multi-story car vending machines. Carvana also operates 15 reconditioning and inspection centers where vehicles are evaluated, and minor fixes can be made before the sale. Customers can also sell their cars to Carvana.

Adesa U.S.’s additional revenue and physical footprint seem to be far too enticing and too great an opportunity for Carvana to ignore. Carvana’s latest acquisition comes at a reasonable time.

Adesa’s acquisition gives Carvana access to its 56 physical sites. Carvana can also use the facilities to inspect and refurbish the vehicles it sells online. The online vehicle marketplace said that this increase in refurbishing operations could help it expand its production capacity from nearly 2 million units to above 3 million units annually.